September 9, 2009 by Canadian Underwriter
Kingsway Financial Services Inc. (TSX: KFS NYSE: KFS) has entered into a definitive agreement to sell Zephyr Insurance Company, Inc.
Kingsway anticipates receiving initial gross proceeds from the transaction of US$31.5 million, plus a contingent, deferred earn-out amount. The deal is expected to be completed during 2009 Q4, according to a Kingsway release.
Purchasing the insurer is Zephyr Acquisition Company, an acquisition vehicle of Ocean Harbor Holding Inc. and MP Holdings LLC, a Hawaiian-based investor group.
Zephyr is a specialty property insurance company founded specifically to protect Hawaii homeowners and residents from catastrophic loss due to hurricanes.
In August 2009, after two years and nine months of rate reductions, pricing in the U.S. for D&O insurance is no longer in decline, according to MarketScout, an online composite commercial rate index.
The overall composite rate for US property and casualty business for Aug. 2009 was -5% compared to -10% one year ago, according to data analyzed by MarketScout.
MarketScout predicts pricing for other lines of business will also begin to buck the downward trend, but most will moderate slowly and general price increases are not expected until 2010.
“It now appears two admitted insurers [that] traditionally write small commercial business are tightening their underwriting guidelines and are no longer accepting tougher classes of business,” Richard Kerr, CEO of MarketScout, said in a release.
“If this more conservative underwriting position holds, we will see some pretty quick rate increases for those small classes of business that must move from admitted to non-admitted insurers.”